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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Europe and Asia investments rise in UK property

Andy-Jalil
Andy-Jalil
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London has kept its crown as the world’s most popular city for global real estate investment according to a new report that sheds light on the burgeoning overseas demand for commercial property in the capital.


International investors accounted for over 70 per cent of purchases in the second quarter of 2018, according to Cushman and Wakefield, a leading global commercial real estate services company.


Buoyed by an influx of Asian money, London has now held its position as the top city for cross-border investment for nine of the past 10 years.


A capital markets report by Cushman and Wakefield published recently, shows London saw off the likes of Paris, Amsterdam and Hong Kong to reclaim the number one spot, as it reported a 22 per cent year-on-year rise in overseas investment up to the first half of this year.


The company’s head of European investment strategy, David Hutchings said: “For long-term investors, while Brexit is a concern, it is one that they are prepared to look through.” He added: “They are focusing on the size, scale and heritage that London has. They know it is still there in 10 years.” A number of high-profile sales have bolstered London’s ranking, such as the sale of the new Goldman Sachs HQ which was snapped up by South Korea’s National Pension Service for £1.1bn in August, and the HQ of UBS, bought by a Hong Kong-focused property developer for £1bn in June.


While buyers from South Korea and Hong Kong have largely dominated the spending spree in London’s commercial property market this year, a number of industry experts are now expecting the arrival of investors from another Asian nation: Japan.


Lee Sheldon, a property tax partner at corporate law firm Addleshaw Goddard, said: “What we are hearing in the trade generally is that Japan is the next one ready to invest properly in the UK.


They invested in London several decades ago and they got a little bit burnt, but now there is a new generation of senior management who are coming to terms with the fact they should come back to the UK market.”


Nick Braybrook, head of Knight Frank’s city capital markets, added: “Once we have some more certainty, I forecast that a lot of money that is currently holding back — and we do know that it is holding back — will get active again.”


London’s appeal as a major hub for overseas investors has been further underlined by figures showing that the proportion of foreign money being injected into the capital’s commercial property has reached an all-time high. A resurgence in demand from European buyers helped to drive central London’s booming office space market in the last three months, with foreign buyers accounting for a record 92 per cent of total investment in the third quarter.


Appetite for skyscrapers — which are increasing in numbers — and major office blocks has largely been dominated by Asian buyers in the last 12 months, but several landmark deals from major European investors caught the headlines during the last quarter. The Spanish billionaire founder of fashion chain Zara, Amancio Ortega, recently snapped up the Adelphi building for £550m using his real estate arm, Ponte Gadea, while German investor Deka splashed out £460m for Victoria’s Verde office development.


“Attractive yields relative to other European cities, coupled with the comparative weakness of sterling, mean we have seen investors from all corners of the globe hungry to deploy capital in London,” said CBRE’s head of London investment properties, James Beckham. He added: “There may be some hesitancy from a few investors over the next six months as we enter the latter stages of Brexit negotiations, but total investment volumes for the year look set to be broadly on par with 2017, once again highlighting the strength of demand for London assets.”


Head of central London at leading agents, Knight Frank, Will Beardmore-Gray said: “Despite all the talk of companies putting decision making on hold until after the Brexit conclusion, this is clearly not what we are seeing in the central London office market.”


According to Beardmore-Gray, a number of locations outside of central London’s traditional core sites have seen an influx of demand from the likes of tech firms and international businesses in the wake of Crossrail’s expected arrival and a swathe of new office buildings.


(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)


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